Manchester United share sale causes controversy among fans and investors
Manchester United fans aren’t happy. And looking at the terms of the proposed share sale in New York announced last night, it’s not hard to see why.
The Glazer family, the club’s US owners, want to raise up to $330m (£210m) on Wall Street, having shelved plans to raise $1bn in Singapore.
The problems lie with the terms of the sale, and what the Glazers intend to do with the money raised.
Only part of the proceeds will go towards paying down the club’s $680m debt, with a significant chunk going directly to the Glazers themselves. And the structure of the sale means the Glazers’ Class B shares will have 10 times the voting power of the Class A shares sold to the public.
“Supporters are going to be very angry about this,” says Duncan Drasdo, chief executive of the Manchester United Supporters Trust.
“The Glazers have already cost United more than £550m in debt-related fees and now we have another slap in the face as they help themselves to half of the proposed [sale] proceeds.
But it’s not just the fans that are unhappy.
More worrying perhaps for the Glazers, given their need to raise cash fast, some investors appear equally sceptical.
“Shareholders are getting a shoddy deal,” says Michael Jarman, chief equity strategist at H2O Markets, an ex-professional footballer and a United fan himself.
“Investors are not idiots and there is simply no value in the company. The Glazers want to have their cake and eat it – the share structure shows they want to retain complete and utter control.”
He says there are plenty of other more attractive investments, where shareholders get a dividend and the chance for capital growth.
While conceding that, “debt free, Manchester United is a good business”, Mr Jarman sees no such value at Old Trafford given its current debt position. In fact, he argues the club is massively overvalued.
At the upper range, the upcoming share flotation values Man Utd at more than $3bn. This is almost 50% more than the value placed upon it by Forbes magazine, which recently pronounced United, at $2.2bn, the most valuable club in world sport.
But many analysts believe even this figures is vastly inflated.
Less than two years ago, a group of investors led by the respected chairman of Goldman Sachs Asset Management, Jim O’Neill, valued the club at about $1.5bn. With two years of global economic stagnation since then, the club’s value will not have risen significantly, if at all.
Factor in operating profits – minus transfer activity – of $150m, and Mr Jarman argues investors are better off buying shares in Tesco.
Full story: http://www.bbc.co.uk/news/business-19061040